The article written by Mark Fischenich in the July 28 Free Press, “City Seeks $1.9M grant for hotel plan,” was very responsible journalism. The article pertains to the $93 million hotel conglomerate project being proposed in the very early stages of consideration.
This is not my opinion on the project, it is an opinion on the process of business subsidy.
During my days on the Mankato City Council we discussed the tools of economic development at both the EDA and council level. Being a small business owner, I naturally had concerns about using grants and Tax Increment Financing. TIF, grants and low interest loans were continually brought forward as a request by developers for help as a “front line” approach in the justification of a project.
The legal tool for TIF that is provided by state statute is the “but for” rationale. In other words, if the project could not proceed on its own merits then TIF could be granted to be used for certain expenses. Most commonly these were blight removal, soils corrections, job creation, etc.
I always thought of “but for” in this way; if the project will not provide a return to the investor considering location then somehow the taxpayer becomes a vested partner, not by their choice, but because the investor is entitled by law if approved by the governing jurisdiction, to make these requests in order to make his project successful.
Hmm.
The most common concerns voiced by my constituents were not about what constituted the understanding of and the “why fors” of the increment, but rather how well the EDA, the Port Authority and the respective city councils, each vetted the issue in terms of economic impact, precedence setting and the financial impact on the city, the school district and the county.
So when Mr. Fischenich reported and now published, that the staff and DEED had prepared a list of about 21 questions that are to be vetted to the public and elected officials, I was delighted. These questions were in regard to the (blank) grant application and should be the same questions justifying TIF and any other business subsidy, if requested.
Thank you also to the city staff and council for passing the following resolution with this caution: “…If the project identified in the application fails to substantially provide the public benefits listed in the application within five years from the date of the grant award, the City of Mankato may be required to repay 100 percent of the awarded grant per Minn. Stat.116J.575, Subd. 4.”
The Free Press continues, and in my mind most importantly, with this closing paragraph: “The city, however, would potentially be able to shift that failure-to-comply financial penalty to the developers via a subrecipient agreement to be negotiated later if the grant is awarded.”
This should be automatic with all grants.
Lastly, if applications for business subsidies, whether they be grants that can be local, state or federal and may require a local match, low interest loans, or Tax Increment Financing … if these applications are completely vetted publicly, then the risks of setting precedence is greatly reduced for the governing body and the public.
Then the process of business subsidy is made whole.
Bob Freyberg is a past councilman for Mankato and North Mankato. He lives in North Mankato.